House Oversight — Estate records
HOUSE_OVERSIGHT_025221
Microsoft Word - 07-25-11 - EOTM - White Castle
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July 25, 2011 Topics: US debt ceiling negotiations, a more ambitious European bailout plan (finally), and how large cap growth stocks and rising corporate profits are patiently waiting for both of them to end White Castle. Twenty five years ago, I had a friend with a peculiar way of responding to seeing things he didn’t like on TV: he would throw White Castle hamburgers at the screen. I always thought this was a bad way to waste a good hamburger, but I had one of those moments the other night when watching news reports on debt ceiling discussions. Media outlets have referred to President Reagan’s scolding of Congressional Republicans for delaying debt ceiling increases, and the 18 increases that took place during his Presidency. The implication: reservations about raising the debt ceiling are as irresponsible now as they were then. This is a disingenuous argument; in the 1980’s, the debt ceiling being debated was 50% of GDP, and had no bearing on the solvency of the United States. Today, the proposed increase raises the debt limit twice as high, measured relative to GDP or government revenues. While a default is a very bad idea (deserving of a White Castle hurling of its own), unconstrained debt growth with no plan to slow it is bad as well. Some suggest we not worry about debt growth, since demand from foreign central banks and the Federal Reserve would keep yields in check. That logic is irresponsible at best. Debt limit legislation is a rocky but healthy way for a democracy to decide whether mega-deficits are in the long-term public interest. Debtlimitdebate of the 80’s: an entirely differentdiscussion Percent Multiple 110% 100% 90% 80% 70% 60% 50% 40% 30% Reagan scolds Congressional Republicans for not raising the debt ceiling Debt limit to GDP Debt limit to gov. receipts 20% 1x 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010 Source: OMB, BEA, J.P. Morgan Private Bank. 8x 7x 6x 5x 4x 3x 2x Over the last few days, the Gang of Six plan, the Reid-McConnell […]